Abc co and xyz co are identical firms in all respects

Reference no: EM13598189

ABC Co. and XYZ Co. are identical firms in all respects except for their capital structure. ABC is all-equity financed with $540,000 in stock. XYZ uses both stock and perpetual debt; its stock is worth $270,000 and the interest rate on its debt is 10 percent. Both firms expect EBIT to be $73,000. Ignore taxes.

Rate of return % 17.04

What is the cost of equity for ABC? What is it for XYZ? Round your answers to 2 decimal places.

Cost of equity
ABC %
XYZ %

Reference no: EM13598189

Questions Cloud

Assume the partnership income-sharing agreement calls for : o. guillen beginning capital 60000 and k. williams beginning capital 90000 are partners. during 2010 the partnership

A small business owner has decided to invest 50000 per year : a small business owner has decided to invest 50000 per year in the stock market for her retirement. she is consider the

You have just been hired as a consultant to tangier : you have just been hired as a consultant to tangier industries a newly formed company. the company president john meeks

The 2010 annual report of software city inc included the : the 2010 annual report of software city inc. included the following comparative summary of earnings per share over the

Abc co and xyz co are identical firms in all respects : abc co. and xyz co. are identical firms in all respects except for their capital structure. abc is all-equity financed

Assume if you were a stockholder who held 100 shares of : kosmier company has outstanding 500000 shares of 50 par value common stock that originally sold for 60 per share.

Sands company had accounts receivable 55600 and allowance : on january 1 2010 sands company had accounts receivable 55600 and allowance for doubtful accounts 5390. sands company

On may 1 2010 newby corp issued 634100 5 5-year bonds at : on may 1 2010 newby corp. issued 634100 5 5-year bonds at face value. the bonds were dated may 1 2010 and pay interest

On july 1 2010 atwater corporation issued 1681700 face : on july 1 2010 atwater corporation issued 1681700 face value 9 10-year bonds at 1920720. this price resulted in an

User Account

All Pages